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Los Angelas, CA -- (SBWIRE) -- 03/04/2013 -- MGIC Investment Corp. (NYSE:MTG)’s inability to pay claims has prompted the company to consider re insuring a portion of its business and also raise more capital.
MGIC provides mortgage lenders risk cover where buyers of houses are unable to make down payments of the required limit.
According to the fourth quarter results reported by the company the preliminary risk-to-capital ratio at MGIC’s combined insurance operations was 47.8 to 1 as of December 31. Mortgage insurance regulators commonly allow for a maximum risk-to-capital ratio of 25 to 1.
For the 2013, the company said it expected that risk to capital ratio to rise about the December 2013 level.
Some of the options being considered by the company are getting reinsurance from its exiting insurance subsidiaries, raising additional capital for its underwriting unit and also for itself.
MGIC is in discussions with regulators and its main counter parties Freddie Mac and Fannie Mae regarding the capital options.
Mortgage re insurers have been hit by the housing bubble in 2007 as foreclosures by homeowners led them to making huge claims settlements on unpaid loans.
MGIC’s fourth-quarter loss almost tripled to $386.7 million, or $1.91 per share, from $135.3 million, or 67 cents per share, a year earlier.
The loss included a $267.5 million settlement with Freddie Mac.
What Are MTG’s Charts Signaling For Traders? Find Out Here
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